Farm commodity futures got the week off to a flyer, led by cotton, which traded up the exchange maximum to a record high, and, in Chicago, by wheat, which sought a fifth positive day.
Sure, for later, many eyes are on cocoa after the country’s president elect, Alassane Ouattara, over the weekend called for a ban on exports of the bean from Ivory Coast, the top producer and exporter.
Investors had already injected some risk premium into prices of the bean, which closed on Friday at multi-month highs in both London and New York, but investors are expecting a further rally today – and potentially for some while to come.
"Any reduction in supply is likely to push the price of the commodity used in chocolate towards a 33-year high because Ivory Coast accounts for about 40% of global cocoa exports," Ker Chung Yang at Phillip Futures in Singapore said.
But cocoa can, for now, do no better than cotton, which soared a further 3.2% on Monday as of 07:45 GMT to 161.94 cents a pound in New York, for the March contract, a record futures price.
Analysts have placed question marks over the sustainability of the fibre’s rally, forecasting a jump in sowings and higher production to rebuild sapped supplies in the US, the top cotton exporter.
These fears appeared to have gain some support last week, when Informa Economics forecast US sowings rebounding some 20% to a six-year high of more than 13m acres.
Still, bulls have three reasons for comfort. The first is bumper US cotton export sales data, showing that even at high prices the desire for cotton is high.
The second is a strong performance by cotton futures on the Zhengzhou exchange in China, the top importer of the commodity, where the September lot jumped more than 5%.
‘Speculators jumped back in’
The third is a more general point about the revived interest in farm commodities confirmed in latest regulatory data.
Early January showed a round of sales by investors in the main US-traded crops, as index funds undertook their so-called "rebalancing" exercise, an annual event in which portfolio weightings are recalibrated back to mandate levels.
However, latest data from US regulators, for the week to January 18, "indicates speculators jumped back into ag markets", Australia & New Zealand Bank said.
On the bank’s methodology, managed funds and the like extended their net long position in the complex by 8%.
"Anything less would have been disappointing, given outside markets were supportive of speculative activity," ANZ said, noting rises in oil and shares, and a weakening dollar.
Among the Chicago crops, corn and soybeans were notable gainers from "aggressive" buying, taking their net long in the grain to its highest since November.
"For soybeans, the net long spec position reached 162,000 contracts, up 11% week on week, and only 8,000 contracts below the record long reached on 9 November last year," ANZ added.
And investors appeared to be maintaining interest on Monday, when corn added 0.3% to $6.59 ½ a bushel for March delivery, while soybeans were 0.7% higher at $14.21 ¾ a bushel.
Sure, rains are set to return to Argentina, which had a dry weekend, further improving prospects for, especially, soybean crops, which are later planted than corn, and so suffered less from an early dearth of moisture.
However, as Benson Quinn Commodities said, "these rains won’t finish the crop in most areas", and will merely slow the pace of deterioration.
And both corn and soybeans were still gaining some support from their own strong export data, as well as statistics later on Friday showing US cattle on feed numbers higher than analysts had expected – data viewed as potentially bearish for livestock futures but supporting ideas of continued strong demand for feed.
Nonetheless, these crops could, once again, not keep up with wheat, whose own export data were hailed by Societe Generale as "massively bullish".
As a further source of interest, a bout of freezing temperatures is sweeping down from Canada, taking temperatures on the border with Minnesota to -37 degrees Fahrenheit on Sunday, according to WxRisk.com weather, although it is not known yet whether the snap will reach America’s lower Plains, where winter wheat seedlings in many areas have been starved of snow cover.
"Right now most of the models take the large Arctic high across the Midwest … and do not plunge the Arctic high into the Lower Plains," WxRisk.com said.
That’s the good news. The less good news is that there is "good potential for significant snow over some portion of the lower Plains", this outlooks is thus far "very tentative".
And that’s before taking technical considerations into account.
"To say that the wheat charts look good would be an understatement," Dave Lehl at Benson Quinn said.
"Extremely positive closes on the daily and weekly continuation charts point toward higher trade."
Chicago’s March contract stood 0.8% higher at $8.31 a bushel.